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OTTAWA — The federal government will refund up to $130 million to skilled workers who applied to Ottawa to come to Canada before 2008 in a bid to get rid of a backlog of about 300,000 applications through legislation.

The plan, outlined in part in Thursday's budget, ultimately will allow the government to ensure skilled newcomers actually meet current labour market needs.

The budget didn't include plans to legislate away the entire backlog of nearly one million, which includes another 160,000 skilled workers who applied after 2008.

While all departments were asked to slash spending by five to 10 per cent, Citizenship and Immigration was spared some of the harshest cuts.

The department will cut about $179 million over three years — nearly $23 million of which will come from the Immigration and Refugee Board.

Much of the savings will result from "reducing overhead costs and continuing to streamline operations and program delivery" at foreign visa offices.

In Hong Kong and Delhi, for example, a significant amount of office space is devoted to the pre-2008 backlog of skilled workers. With that eliminated through the refund program, officials suggest there will be reduced overhead.

By centralizing part of its visa processing, the department will also "reduce duplication and overlap" and ensure that those who are applying from within Canada are processed in Canada, according to the budget.

The budget also seeks to "better align the temporary foreign worker program with labour market demands."

The plan, which will be unveiled in full in the coming months, seeks to encourage Canadian employers to consider the domestic labour market before hiring overseas workers to fill gaps, by giving them access to Canada's pool of employment insurance recipients.

While many temporary foreign workers are employed seasonally in the agriculture sector, officials say there are also other shortages — for example, of lawyers in Saskatchewan — and that this is not about putting unemployed Canadians to work picking fruit.

The budget also calls for a new skilled tradespeople stream under the federal skilled worker program to attract more plumbers, electricians, crane operators and construction workers.

As a result, sources suggest the current annual federal cap of 10,000 skilled worker applications is likely to increase.

"Our government will reform Canada's immigration system to make it faster and more efficient," Finance Minister Jim Flaherty said.

"We will ensure it is designed, above all, to strengthen Canada's economy. As a result we will be better able to fill gaps in our labour force. We will attract more of the entrepreneurs we need to create good jobs and long-term economic growth."

NDP immigration critic Don Davies called the skilled worker refund an "admission of failure" and suggested it's clear the government has no idea how to solve the backlog problem.

He believes Immigration Minister Jason Kenney should have fought harder to spare his department from any cuts and should have pushed for more money to hire staff and upgrade computer systems to improve transparency and speed up the processing of applications.

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